Privacy Policy vs Terms of Service: What's the Difference?
If you're launching a startup, you've probably been told you need a privacy policy and terms of service. Most founders treat them as the same thing, or at least lump them together under "policy docs I'll deal with later." They're not the same thing, and understanding the difference matters more than you'd think.
The Short Version
A privacy policy explains what data you collect from users and what you do with it. A terms of service sets the rules for using your product.
That's it. One is about data. The other is about rules.
But the details matter, especially when app stores, payment processors, and regulations like GDPR all have opinions about what your policy docs should say.
What a Privacy Policy Covers
A privacy policy is a disclosure document. It tells your users what personal information you collect, why you collect it, how you store it, and who you share it with.
If your app or website does any of the following, you need a privacy policy:
- Collects email addresses (even just for a newsletter)
- Uses analytics tools like Google Analytics, Mixpanel, or PostHog
- Processes payments through Stripe, Paddle, or any payment provider
- Uses cookies or tracking pixels
- Stores user accounts with personal information
- Integrates with third-party services that access user data
That covers nearly every SaaS product, mobile app, and website with a contact form. If you collect any data at all, even a name and email, most jurisdictions require you to disclose it.
Key Sections in a Privacy Policy
- What data you collect — names, emails, payment info, usage data, device info
- Why you collect it — to provide the service, for analytics, for marketing
- How you store and protect it — encryption, cloud providers, retention periods
- Who you share it with — payment processors, analytics tools, email providers
- User rights — how users can access, update, or delete their data
- Cookie usage — what cookies you use and why
- Contact information — how users can reach you with questions
Who Requires One?
Pretty much everyone. GDPR (Europe), CCPA (California), PIPEDA (Canada), and dozens of other regulations mandate privacy policies. Beyond legal requirements, Google Play, Apple's App Store, Google AdSense, and Stripe all require a privacy policy before you can use their platforms.
Not having one isn't just a legal risk. It can block you from launching on the platforms your users are on.
What Terms of Service Cover
Terms of service (sometimes called terms of use or terms and conditions) are the rules users agree to when they use your product. If a privacy policy is a disclosure, terms of service are a contract.
They define what users can and can't do, what happens when things go wrong, and what your responsibilities are as the service provider.
Key Sections in Terms of Service
- Acceptable use — what users are allowed to do (and what's prohibited)
- Account responsibilities — users are responsible for their login credentials and activity
- Intellectual property — who owns what (your product, their content, user-generated data)
- Payment terms — billing, refunds, cancellation policies
- Limitation of liability — caps on damages and disclaimers
- Termination — when and how you can suspend or close accounts
- Dispute resolution — governing law, arbitration clauses, jurisdiction
- Modifications — how you'll notify users of changes
Are Terms of Service Legally Required?
Unlike privacy policies, terms of service aren't strictly required by law in most places. But operating without them is risky. Without terms of service, you have no documented agreement about what happens when a user abuses your platform, demands a refund, or claims your product caused them harm.
Think of it this way: a privacy policy protects your users. Terms of service protect you.
Do You Need Both?
Almost always, yes. They complement each other:
| | Privacy Policy | Terms of Service | |---|---|---| | Purpose | Disclose data practices | Set usage rules | | Protects | Your users | Your business | | Required by law? | Yes (in most cases) | Rarely, but strongly recommended | | Required by platforms? | Yes (app stores, ad networks, payment processors) | Often (app stores, SaaS platforms) | | Audience | Anyone whose data you collect | Anyone who uses your product |
If you're building a SaaS, mobile app, or even a simple website that collects emails, you should have both in place before you launch. Not "eventually." Before you launch.
The Most Common Mistake
Founders either skip both documents entirely or copy someone else's. Both are bad ideas.
Skipping them leaves you exposed to legal liability and can literally prevent you from listing on app stores or using payment processors. Copying another company's policy docs means your documents don't reflect your actual data practices or business model, which makes them worse than useless since they could misrepresent what you actually do.
Your policy docs should reflect your actual product: what data you collect, what tools you use, how your billing works, what your refund policy is. Generic templates miss all of that.
Getting Them Done Without the Overhead
You don't need to spend $2,000 on a lawyer for your first set of policy docs. At the same time, pasting a template from Google and calling it done puts you at risk.
The middle ground is a generator that asks the right questions about your product and builds documents that actually match what you do. That's exactly what TOS Tools does: you answer questions about your business, and it generates a privacy policy and terms of service tailored to your stack, your data practices, and your business model. One-time purchase, no subscription.
Whatever route you pick, the important part is getting both documents in place before launch. They take an afternoon. The legal exposure of not having them lasts a lot longer.